Delay in Monetary Policy Again

Shinzo Abe administration seems to have abandoned its famous agenda of targeted inflation within two years from April 2013. While it has already passed this April, Governor of Bank of Japan, Haruhiko Kuroda, kept on explaining that Japanese economy was reaching the goal. Now, any explanation cannot be accepted by anyone and the scenario of revitalizing Japanese economy is collapsing.

In the policy meeting on Friday, Bank of Japan postponed its goal of achieving the growth of commodity price by 2% from “the first half of 2016” to “the second half of 2016.” This was the second correction of the time for the goal, following the announcement in this spring. Urged by Abe, Kuroda launched “quantitative monetary easing in different dimension” of 2% inflation within two years in April 2013. Everyone interpreted Kuroda’s words as achieving the goal by April 2015. However, it became sure that the goal would be delayed to the spring of 2017.

Kuroda was eloquent in elaborating the situation of economy that became unable to reach the goal. “It was mainly affected by downward preference of energy prices, especially a major decline of oil price since the summer of 2014. A lot of unpredicted things may happen with volatility in and out of Japan,” told Kuroda in his press conference. You’re right, Mr. Governor. But didn’t you include that possibility, anyway?

Kuroda was devoted in defending his policy. He stressed resilience of price, quoting 1.2% growth of price except energy. Well, commodity price cannot exclude energy price, you know. “We decided that it was appropriate to maintain current quantitative and qualitative monetary easing in a situation of eventual improvement of fundamentals of price,” told Kuroda, asked the reason of avoiding additional monetary easing. His elaboration did not make much sense.

There is no support for achieving 2% goal from the side of politics. The leaders of Abe administration have no idea to tackle with the energy price down. “What we can do with monetary policy is limited,” told Minister of Finance, Taro Aso. Abe is eager to improve Japanese economy no longer by monetary policy, but by trickle-down theory from employers to workers. After issuing extraordinarily great amount of money to the market, the leaders are frustrated with business leaders who have been keeping profit in their company.

It is necessary for Abe administration to admit its failure in monetary policy and set alternative target for economic growth. They are too weak to be honest to the people.